In my horribly hungover state, the first thing I did when I got to work this morning was go looking for pain relief. Excellent, I thought, there is some Nurofen in the cupboard. My initial exuberance was soon allayed as I saw we only had Nurofen ‘Back Pain’ medication, not what I was after, while the Nurofen ‘Migraine Pain’ packet was cruelly empty. A closer inspection of the packets, however, revealed the two contained exactly the same ingredients!

I’ve always found this sort of thing slightly amusing. I can think of two ways such differentiation could be welfare-improving, though: 1) The placebo effect might be stronger when you’re taking meds you think are specifically designed for your ailment. 2) More importantly, it reduces search costs. If the company knows that ibuprofen is relatively more effective at easing the pain of migraines and hangovers, and that paracetamol more effective at regular headaches and muscle pain, having a specific packaging for each ailment would make it easier for you to find what you want. The alternative would be people knowing what medicine does what or wildly disjunctive product names.

Besides, I think ‘moron’ is a strong term to use: we’re just boundedly rational and use heuristics to make decisions given our limited capacity for computing optimal choices. I don’t think Matt’s decision to go with the well known Nurofen is necessarily stupid or irrational. One has to take account of his mental computing constraints and the fact that it’s almost maxed out educating the world about economics!

While at the supermarket the other day I noted that Nurofen ‘Back Pain’ was retailing for just under $14, while Pams Ibuprofen (exactly the same number of pills and ingredients) was retailing for just under $4.